CDS for MBS Pays as You Go or Physical Settlement | Bonds (Finance) | Derivative (Finance)

[Headed paper of Party A] Date: To: From: RE: [ [Party A] Credit Derivative Transaction on Mortgage-Backed Security with Pay-As-You

-Go or Physical Settlement (Form I) (Dealer Form)1 ]

[Name and Address or Facsimile Number of Party B]

_____________________________________________________________________________________ Dear ________________: The purpose of this [letter] (the “Confirmation”) is to confirm the terms and conditions of the Credit Derivative Transaction relating to a mortgage-backed security reference obligation entered into between us on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 2003 ISDA Credit Derivatives Definitions (the “Credit Derivatives Definitions”), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between the Credit Derivatives Definitions and this Confirmation, this Confirmation shall govern. [This Confirmation supplements, forms a part of, and is subject to, the ISDA Master Agreement, dated as of [date], as amended and supplemented from time to time (the “Agreement”), between you and us. All provisions contained in the Agreement govern this Confirmation except as expressly modified below.]2
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THE FOOTNOTES TO THIS CONFIRMATION ARE PROVIDED FOR CLARIFICATION ONLY AND DO NOT CONSTITUTE ADVICE AS TO THE STRUCTURING OR DOCUMENTATION OF A CREDIT DERVATIVE TRANSACTION. ISDA has not undertaken to review all applicable laws and regulations of any jurisdiction in which the Credit Derivatives Definitions or this form may be used. Therefore, parties are advised to consider the application of any relevant jurisdiction’s regulatory, tax, accounting, exchange or other requirements that may exist in connection with the entering into and documenting of a privately negotiated credit derivative transaction. This form is designed for use primarily with a Reference Obligation that is a residential mortgage-backed security (“RMBS”) or commercial mortgage-backed security (“CMBS”). ISDA anticipates future publication of one or more template Confirmations for use with other types of asset-backed security (such as credit card receivables-backed securitization notes or collateralized debt obligation notes). Before using this form for any other type of asset-backed security, parties should consider whether it is suitable for use with, or what appropriate modifications should be made for use with, such other type of asset-backed security, and whether any other form published by ISDA would be more suitable for use with such assetbacked security. Even when using with an RMBS or CMBS as the Reference Obligation, parties should consider what modifications may be appropriate to this form to reflect the specific terms of the specified Reference Obligation. Parties should also consider whether this form is appropriate where the Reference Obligation has the benefit of a monoline wrap. Include if applicable. If the parties have not yet executed, but intend to execute, an ISDA Master Agreement, include, instead of this paragraph, the following: “This Confirmation evidences a complete

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Copyright © April 2006 by International Swaps & Derivatives Association, Inc.

References in this Confirmation to the “Reference Obligation” shall be to the terms of the Reference Obligation (as defined below) set out in the Underlying Instruments (as defined below) as amended from time to time unless otherwise specified below. The terms of the Transaction to which this Confirmation relates are as follows: 1. General Terms: Trade Date: Effective Date: Scheduled Termination Date: [ ]

[Trade Date plus three Business Days] Subject to paragraph 5, the Legal Final Maturity Date of the Reference Obligation, subject to adjustment in accordance with the Following Business Day Convention. The last to occur of: (a) (b) (c) (d) the fifth Business Day following the Effective Maturity Date; the last Floating Rate Payer Payment Date; the last Delivery Date; and the last Additional Fixed Amount Payment Date.

Termination Date:

Floating Rate Payer: Fixed Rate Payer: Calculation Agent:

[Party A] [Party B] (the “Seller”). [Party A] [Party B] (the “Buyer”). [ ]

and binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. In addition, you and we agree to use all reasonable efforts promptly to negotiate, execute and deliver an agreement in the form of an ISDA Master Agreement, with such modifications as you and we will in good faith agree. Upon the execution by you and us of such an agreement, this Confirmation will supplement, form part of, and be subject to that agreement. All provisions contained in or incorporated by reference in that agreement upon its execution will govern this Confirmation except as expressly modified below. Until we execute and deliver that agreement, the Confirmation, together with all other documents referring to an ISDA Master Agreement (each a “Confirmation”) confirming transactions (each a “Transaction”) entered into between us (notwithstanding anything to the contrary in a Confirmation), shall supplement, form a part of, and be subject to, an agreement in the form of the 1992 ISDA Master Agreement (Multicurrency – Cross Border) if any Confirmation dated prior to the date of this Confirmation refers to that ISDA Master Agreement and otherwise the 2002 ISDA Master Agreement as if we had executed an agreement in such form (but without any Schedule except for the election of [English law][the laws of the State of New York] as the governing law and [specify currency] as the Termination Currency) on the Trade Date of the first such Transaction between us. In the event of any inconsistency between the provisions of that agreement and this Confirmation, this Confirmation will prevail for purposes of this Transaction.”

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Calculation Agent City: Business Day: Business Day Convention:

[ [

] ]

Following (which, with the exception of the Effective Date, the Final Amortization Date, each Reference Obligation Payment Date and the period end date of each Reference Obligation Calculation Period, shall apply to any date referred to in this Confirmation that falls on a day that is not a Business Day). [ ]3

Reference Entity: Reference Obligation:

The obligation identified as follows: Issuer: [Insurer: CUSIP/ISIN: [Bloomberg ID:] Legal final maturity date: Original Principal Amount: Initial Factor: [Coupon: The Reference Entity [ [ [ [ [ [ [ ]] ] ] ] ]4 ]5 ]]6

Section 2.30 of the Credit Derivatives Definitions shall not apply. Reference Policy: Reference Price: Applicable Percentage: [ ] [100]%7 On any day, a percentage equal to A divided by B. “A” means the product of the Initial Face Amount and

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Specify issuer of the Reference Obligation. If the issuer is unnamed, specify as appropriate, for example, as “the trust formed pursuant to the [Pooling and Servicing Agreement] dated as of [ ] in connection with the issuance of the [ ] Certificates, Series [ ].” Insert the principal amount of the Reference Obligation on the day it was issued. A ratio equal to the Outstanding Principal Amount as of the Effective Date divided by the Original Principal Amount. Parties may wish to consider inserting the definition of the coupon from the Underlying Instruments, including any stated cap. Parties may wish to note that the Reference Price in this form is used to adjust pro-rata any Physical Settlement Amount, Writedown Amount, Writedown Reimbursement Amount, Principal Shortfall Amount or Principal Shortfall Reimbursement Amount. This is different to its use in the Credit Derivatives Definitions, where the Reference Price is used as the basis for calculating the Cash Settlement Amount or Physical Settlement Amount, as applicable.

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the Initial Factor as decreased on each Delivery Date by an amount equal to (a) the outstanding principal balance of Deliverable Obligations Delivered to Seller (as adjusted by the Relevant Amount, if any) divided by the Current Factor on such day multiplied by (b) the Initial Factor. “B” means the product of the Original Principal Amount and the Initial Factor; (a) as increased by the outstanding principal balance of any further issues by the Reference Entity that are fungible with and form part of the same legal series as the Reference Obligation; and as decreased by any cancellations of some or all of the Outstanding Principal Amount resulting from purchases of the Reference Obligation by or on behalf of the Reference Entity.8

(b)

Initial Face Amount: Reference Obligation Notional Amount:

[ ]9 On the Effective Date, the product of: (a) (b) (c) the Original Principal Amount; the Initial Factor; and the Applicable Percentage. Reference

Following the Effective Date, the Obligation Notional Amount will be: (i)

decreased on each day on which a Principal Payment is made by the relevant Principal Payment Amount; decreased on the day, if any, on which a Failure to Pay Principal occurs by the relevant Principal Shortfall Amount; decreased on each day on which a Writedown occurs by the relevant Writedown Amount; increased on each day on which a Writedown

(ii)

(iii) (iv)
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This represents the percentage covered by this Transaction of the Outstanding Principal Amount. It may be more than 100%. The initial par amount of the Reference Obligation referenced for purposes of the Transaction, which amount could be equal to, greater than or less than the Original Principal Amount.

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Reimbursement occurs by any Writedown Reimbursement Amount in respect of a Writedown Reimbursement within paragraphs (ii) or (iii) of the definition of “Writedown Reimbursement”; and (v) decreased on each Delivery Date by an amount equal to the relevant Exercise Amount minus the amount determined pursuant to paragraph (b) of “Physical Settlement Amount” below, provided that if any Relevant Amount is applicable, the Exercise Amount will also be deemed to be decreased by such Relevant Amount (or increased by the absolute value of such Relevant Amount if such Relevant Amount is negative) with effect from such Delivery Date;

provided that if the Reference Obligation Notional Amount would be less than zero, it shall be deemed to be zero. Initial Payment: [Not applicable] [On [the Effective Date], [Buyer]/[Seller] will pay [USD][ ] to [Seller]/[Buyer].] 2. Fixed Payments: Fixed Rate Payer: Fixed Rate: Fixed Rate Payer Period End Date: Fixed Rate Payer Payment Dates: Buyer [ ]% per annum; subject to adjustment in accordance with paragraph 5 below. The first day of each Reference Obligation Calculation Period. [Each day falling five Business Days after a Reference Obligation Payment Date; provided that the final Fixed Rate Payer Payment Date shall fall on the fifth Business Day following the Effective Maturity Date.]10 [After each Reference Obligation Payment Date, the next following 25th calendar day of the month, except that when a Reference Obligation Payment Date falls on or after 25th calendar day of a month, the Fixed Rate Payer Payment Date in respect of such Reference Obligation Payment Date shall be 25th calendar day of the next following month; provided that the final Fixed
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Parties should select this version of the definition where the Reference Obligation is not a U.S. CMBS.

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Rate Payer Payment Date shall fall on the fifth Business Day following the Effective Maturity Date.]11 Fixed Amount: With respect to any Fixed Rate Payer Payment Date, an amount equal to the product of: (a) the Fixed Rate;

[EITHER] 12 [(b) an amount determined Calculation Agent equal to: by the

(i) the sum of the Reference Obligation Notional Amount as at 5:00 p.m. in the Calculation Agent City on each day in the related Fixed Rate Payer Calculation Period; divided by (ii) the actual number of days in the related Fixed Rate Payer Calculation Period; and] [OR] [(b) the Reference Obligation Notional Amount outstanding on the last day of the Reference Obligation Calculation Period related to such Fixed Rate Payer Payment Date, as adjusted for any increases or decreases of the Reference Obligation Notional Amount on the Reference Obligation Payment Date immediately preceding the related Reference Obligation Payment Date; and] (c) the actual number of days in the related Fixed Rate Payer Calculation Period divided by 360. Additional Fixed Amount Payment Dates: (a) and Each Fixed Rate Payer Payment Date;

(b) in relation to each Additional Fixed Payment Event occurring after the second Business Day prior to the last Fixed Rate Payer Payment Date, the fifth Business Day after Buyer has received notification from
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Parties should select this version of the definition where the Reference Obligation is a U.S. CMBS. Parties should select the version of this sub-clause (b) that is appropriate in view of the interest basis of the Reference Obligation as set out in the Underlying Instruments. The former version may be preferred if the Reference Obligation is a floating rate security, and the latter version if it is a fixed rate security.

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Seller or the Calculation Agent of the occurrence of such Additional Fixed Payment Event. Additional Fixed Payments: Following the occurrence of an Additional Fixed Payment Event in respect of the Reference Obligation, Buyer shall pay the relevant Additional Fixed Amount to Seller on the first Additional Fixed Amount Payment Date falling at least two Business Days (or in the case of an Additional Fixed Payment Event that occurs after the second Business Day prior to the last Fixed Rate Payer Payment Date, five Business Days) after the delivery of a notice by the Calculation Agent to the parties or by Seller to Buyer stating that the related Additional Fixed Amount is due and showing in reasonable detail how such Additional Fixed Amount was determined; provided that any such notice must be given on or prior to the fifth Business Day following the day that is one calendar year after the Effective Maturity Date. The occurrence on or after the Effective Date and on or before the day that is one calendar year after the Effective Maturity Date of a Writedown Reimbursement, a Principal Shortfall Reimbursement or an Interest Shortfall Reimbursement. With respect to each Additional Fixed Amount Payment Date, an amount equal to the sum of: (a) the Writedown Payment Amount (if any); Reimbursement

Additional Fixed Payment Event:

Additional Fixed Amount:

(b) the Principal Shortfall Reimbursement Payment Amount (if any); and (c) the Interest Shortfall Reimbursement Payment Amount (if any). For the avoidance of doubt, each Writedown Reimbursement Payment Amount, Principal Shortfall Reimbursement Payment Amount or Interest Shortfall Reimbursement Payment Amount (as applicable) shall be calculated using the Applicable Percentage which takes into account the aggregate adjustment made to the Applicable Percentage in respect of all Delivery Dates that have occurred prior to the date of such calculation.

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3.

Floating Payments: Floating Rate Payer: Floating Rate Payer Payment Dates: Seller In relation to a Floating Amount Event, the first Fixed Rate Payer Payment Date falling at least two Business Days (or in the case of a Floating Amount Event that occurs on the Legal Final Maturity Date or the Final Amortization Date, the fifth Business Day) after delivery of a notice by the Calculation Agent to the parties or a notice by Buyer to Seller that the related Floating Amount is due and showing in reasonable detail how such Floating Amount was determined; provided that any such notice must be given on or prior to the fifth Business Day following the Effective Maturity Date. If a Floating Amount Event occurs, then on the relevant Floating Rate Payer Payment Date, Seller will pay the relevant Floating Amount to Buyer. For the avoidance of doubt, the Conditions to Settlement are not required to be satisfied in respect of a Floating Payment. A Writedown, a Failure to Pay Principal or an Interest Shortfall. With respect to each Floating Rate Payer Payment Date, an amount equal to the sum of: (a) (b) (c) the relevant Writedown Amount (if any); the relevant Principal Shortfall Amount (if any); and the relevant Interest Shortfall Payment Amount (if any).

Floating Payments:

Floating Amount Event: Floating Amount:

For the avoidance of doubt, each Writedown Amount, Principal Shortfall Amount or Interest Shortfall Payment Amount (as applicable) shall be calculated using the Applicable Percentage which takes into account the aggregate adjustment made to the Applicable Percentage in respect of all Delivery Dates that have occurred prior to the date of such calculation. Conditions to Settlement: Credit Event Notice Notifying Party: Buyer Notice of Physical Settlement

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Notice of Publicly Available Information: Applicable Public Sources: The public sources listed in Section 3.7 of the Credit Derivatives Definitions; provided that Servicer Reports in respect of the Reference Obligation and, in respect of a Distressed Ratings Downgrade Credit Event only, any public communications by any of the Rating Agencies in respect of the Reference Obligation shall also be deemed Public Sources. 1

Specified Number:

provided that if the Calculation Agent has previously delivered a notice to the parties or Buyer has previously delivered a notice to Seller pursuant to the definition of “Floating Rate Payer Payment Dates” above in respect of a Writedown or a Failure to Pay Principal, the only Condition to Settlement with respect to any Credit Event shall be a Notice of Physical Settlement. The parties agree that with respect to the Transaction and notwithstanding anything to the contrary in the Credit Derivatives Definitions: (a) (b) (c) the Conditions to Settlement may be satisfied on more than one occasion; multiple Physical Settlement Amounts may be payable by Seller; Buyer, when providing a Notice of Physical Settlement, must specify an Exercise Amount and an Exercise Percentage; if Buyer has delivered a Notice of Physical Settlement that specifies an Exercise Amount that is less than the Reference Obligation Notional Amount as of the date on which such Notice of Physical Settlement is delivered (calculated as though Physical Settlement in respect of all previously delivered Notices of Physical Settlement has occurred in full), the rights and obligations of the parties under the Transaction shall continue and Buyer may deliver additional Notices of Physical

(d)

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Settlement with respect to the initial Credit Event or with respect to any additional Credit Event at any time thereafter; and (e) any Notice of Physical Settlement shall be delivered no later than 30 calendar days after the fifth Business Day following the earlier of the Effective Maturity Date and the Optional Step-up Early Termination Date.

Section 3.2(d) of the Credit Derivatives Definitions is amended to delete the words “that is effective no later than thirty calendar days after the Event Determination Date”. Credit Events: The following Credit Events shall apply to this Transaction (and the first sentence of Section 4.1 of the Credit Derivatives Definitions shall be amended accordingly): Failure to Pay Principal Writedown [Distressed Ratings Downgrade] 13 Obligation: 4. Interest Shortfall Interest Shortfall Payment Amount: In respect of an Interest Shortfall, the relevant Interest Shortfall Amount; provided that, if Interest Shortfall Cap is applicable and the Interest Shortfall Amount exceeds the Interest Shortfall Cap Amount, the Interest Shortfall Payment Amount in respect of such Interest Shortfall shall be the Interest Shortfall Cap Amount. [Applicable][Not Applicable] As set out in the Interest Shortfall Cap Annex. With respect to any Reference Obligation Payment Date, payment by or on behalf of the Issuer of an amount in respect of interest due under the Reference Obligation (including, without limitation, any deferred interest or defaulted interest but excluding payments in respect of prepayment penalties, yield maintenance provisions or principal, except that the Actual Interest Amount shall Reference Obligation Only

Interest Shortfall Cap: Interest Shortfall Cap Amount: Actual Interest Amount:

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Parties may wish to disapply the Distressed Ratings Downgrade Credit Event where the Reference Obligation is a CMBS.

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include any payment of principal representing capitalized interest) to the holder(s) of the Reference Obligation in respect of the Reference Obligation. WAC Cap Interest Provision: [Applicable][Not Applicable]. For this purpose, “WAC Cap” means a weighted average coupon or weighted average rate cap provision (however defined in the Underlying Instruments) of the Underlying Instruments that limits, increases or decreases the interest rate or interest entitlement, as set out in the Underlying Instruments on the Effective Date without regard to any subsequent amendment. Expected Interest Amount: With respect to any Reference Obligation Payment Date, the amount of current interest that would accrue during the related Reference Obligation Calculation Period calculated using the Reference Obligation Coupon on a principal balance of the Reference Obligation equal to: (a) the Outstanding Principal Amount taking into account any reductions due to a principal deficiency balance or realized loss amount (however described in the Underlying Instruments) that are attributable to the Reference Obligation minus (b) the Aggregate Implied Writedown Amount (if any) and that will be payable on the related Reference Obligation Payment Date assuming for this purpose that sufficient funds are available therefor in accordance with the Underlying Instruments. Except as provided in (a) in the previous sentence, the Expected Interest Amount shall be determined without regard to (i) unpaid amounts in respect of accrued interest on prior Reference Obligation Payment Dates, or (ii) any prepayment penalties or yield maintenance provisions. The Expected Interest Amount shall be determined: (x) if WAC Cap Interest Provision is applicable, after giving effect to any WAC Cap; and (y) if WAC Cap Interest Provision is not applicable, without giving effect to any WAC Cap; and in either case without regard to the effect of any provisions (however described) of such Underlying Instruments that otherwise permit the limitation of due payments to

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distributions of funds available from proceeds of the Underlying Assets, or that provide for the capitalization or deferral of interest on the Reference Obligation, or that provide for the extinguishing or reduction of such payments or distributions (but, for the avoidance of doubt, taking account of any Writedown within paragraph (i) of the definition of “Writedown” occurring in accordance with the Underlying Instruments). Interest Shortfall: With respect to any Reference Obligation Payment Date, either (a) the non-payment of an Expected Interest Amount or (b) the payment of an Actual Interest Amount that is less than the Expected Interest Amount. For the avoidance of doubt, the occurrence of an event within (a) or (b) shall be determined taking into account any payment made under the Reference Policy, if applicable. Interest Shortfall Amount: With respect to any Reference Obligation Payment Date, an amount equal to the greater of: (a) (b) zero; and the amount equal to the product of: (i) (A) the Expected Interest Amount; minus (B) (ii) the Actual Interest Amount; and

the Applicable Percentage;

provided that, with respect to the first Reference Obligation Payment Date only, the Interest Shortfall Amount shall be the amount determined in accordance with (a) and (b) above multiplied by a fraction equal to: (x) (y) Interest Shortfall Reimbursement: the number of days in the first Fixed Rate Payer Calculation Period; over the number of days in the first Reference Obligation Calculation Period.

With respect to any Reference Obligation Payment Date, the payment by or on behalf of the Issuer of an Actual Interest Amount in respect of the Reference Obligation that is greater than the Expected Interest Amount. With respect to any Reference Obligation Payment Date, the product of (a) the amount of any Interest Shortfall

Interest Shortfall Reimbursement Amount:

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Reimbursement on such day and (b) the Applicable Percentage. Interest Shortfall Reimbursement Payment Amount: If Interest Shortfall Cap is not applicable, the relevant Interest Shortfall Reimbursement Amount. If Interest Shortfall Cap is applicable, the amount determined pursuant to the Interest Shortfall Cap Annex.

5.

Consequences of Step-up of the Reference Obligation Coupon Step-up provisions: [Applicable][Not Applicable] If the Step-up provisions are applicable, then the following provisions of this paragraph 5 shall apply. Step-up: On any day, an increase in the Reference Obligation Coupon due to the failure of the Issuer or a third party to exercise, in accordance with the Underlying Instruments, a “clean-up call” or other right to purchase, redeem, cancel or terminate (however described in the Underlying Instruments) the Reference Obligation. The date of delivery by the Calculation Agent to the parties or by Buyer to Seller of a Non-Call Notice. A notice given by the Calculation Agent to the parties or by Buyer to Seller that the Reference Obligation has not been purchased, redeemed, cancelled or terminated by the Issuer or a third party, in accordance with the Underlying Instruments, pursuant to a “clean-up call” or other right to purchase, redeem, cancel or terminate (however described in the Underlying Instruments) the Reference Obligation, which failure will result in the occurrence of a Step-up. Subject to “Optional Step-up Early Termination” below, upon the occurrence of a Step-up, the Fixed Rate will be increased by the number of basis points by which the Reference Obligation Coupon is increased due to the Step-up, such increase to take effect as of the Fixed Rate Payer Payment Date immediately following the fifth Business Day after the Non-Call Notification Date. No later than five Business Days after the Non-Call Notification Date, Buyer shall notify Seller (such notification, a “Buyer Step-up Notice”) whether Buyer wishes to continue the Transaction at the increased Fixed Rate or to terminate the Transaction. If Buyer elects to terminate the Transaction, the date of delivery of the Buyer Step-up Notice shall be the Scheduled

Non-Call Notification Date: Non-Call Notice:

Increase of the Fixed Rate:

Optional Step-up Early Termination:

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Termination Date (such date, the “Optional Step-up Early Termination Date”) and in such case “Increase of the Fixed Rate” in this paragraph 5 shall not apply. No amount shall be payable by either party in respect of the Optional Step-up Early Termination Date other than any Fixed Amount, Additional Fixed Amount, Floating Amount or Physical Settlement Amount calculated in accordance with the terms hereof. For the avoidance of doubt, the obligation of a party to pay any amount that has become due and payable under the Transaction and remains unpaid as at the Optional Step-up Early Termination Date shall not be affected by the occurrence of the Optional Step-up Early Termination Date. If Buyer fails to deliver the Buyer Step-up Notice by the fifth Business Day after the Non-Call Notification Date, Buyer shall be deemed to have elected to continue the Transaction at the increased Fixed Rate as described under “Increase of the Fixed Rate”. If Buyer elects, or is deemed to have elected, to continue the Transaction at the increased Fixed Rate, the Transaction shall continue. 6. Settlement Terms Settlement Method: Physical Settlement

Terms Relating to Physical Settlement: Physical Settlement Period: Deliverable Obligations: Deliverable Obligations: Physical Settlement Amount: Five Business Days Exclude Accrued Interest Deliverable Obligation Category: Only An amount equal to: (a) (b) the product of the Exercise Amount and the Reference Price; minus the sum of: (i) if the Aggregate Implied Writedown Amount is greater than zero, the product of (A) the Aggregate Implied Writedown Amount, (B) the Applicable Percentage, each as determined immediately prior to Reference Obligation

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the relevant Delivery and (C) the relevant Exercise Percentage; and (ii) the product of (A) the aggregate of all Writedown Amounts in respect of Writedowns within paragraph (i)(B) of the definition of “Writedown” minus the aggregate of all Writedown Reimbursement Amounts in respect of Writedown Reimbursements within paragraph (ii)(B) of the definition of “Writedown Reimbursement” and (B) the relevant Exercise Percentage;

provided that if the Physical Settlement Amount would exceed the product of: (1) the Reference Obligation Notional Amount as of the date on which the relevant Notice of Physical Settlement is delivered calculated as though Physical Settlement in respect of all previously delivered Notices of Physical Settlement has occurred in full; and the Exercise Percentage;

(2)

then the Physical Settlement Amount shall be deemed to be equal to such product. Delayed Payment: With respect to a Delivery Date, if a Servicer Report that describes a Delayed Payment is delivered to holders of the Reference Obligation or to the Calculation Agent on or after such Delivery Date, Buyer will pay the applicable Delayed Payment Amount to Seller no later than five Business Days following such Delayed Payment. Applicable

Escrow:

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Non-delivery by Buyer or If Buyer has delivered a Notice of Physical Settlement and: occurrence of the Effective (a) Buyer does not Deliver in full the Deliverable Maturity Date: Obligations specified in that Notice of Physical Settlement on or prior to the Physical Settlement Date; or (b) the Effective Maturity Date occurs after delivery of the Notice of Physical Settlement but before Buyer Delivers the Deliverable Obligations specified in that Notice of Physical Settlement;

then such Notice of Physical Settlement shall be deemed not to have been delivered and any reference in this Confirmation to a previously delivered Notice of Physical Settlement shall exclude any Notice of Physical Settlement that is deemed not to have been delivered. Sections 9.2(c) (ii) (except for the first sentence thereof), 9.3, 9.4, 9.5, 9.6, 9.9 and 9.10 of the Credit Derivatives Definitions shall not apply. 7. (a) Additional Provisions: Delivery of Servicer Report If either party makes a request in writing, the Calculation Agent agrees to provide such party with a copy of the most recent Servicer Report promptly following receipt of such request, if and to the extent such Servicer Report is reasonably available to the Calculation Agent (whether or not the Calculation Agent is a holder of the Reference Obligation). In addition, if a Floating Payment or an Additional Fixed Payment is due hereunder, then the Calculation Agent or the party that notifies the other party that the relevant Floating Payment or Additional Fixed Payment is due, as applicable, (the “Notifying Party”) shall deliver a copy of any Servicer Report relevant to such payment that is requested by the party that is not the Notifying Party or by either party where the Notifying Party is the Calculation Agent, if and to the extent that such Servicer Report is reasonably available to the Notifying Party (whether or not the Notifying Party is a holder of the Reference Obligation). (b) Calculation Agent and Buyer and Seller Determinations The Calculation Agent shall be responsible for determining and calculating (i) the Fixed Amount payable on each Fixed Rate Payer Payment Date; (ii) the occurrence of a Floating Amount Event and the related Floating Amount and (iii) the occurrence of an Additional Fixed Payment Event and the related Additional Fixed Amount; provided that notwithstanding the above, each of Buyer and Seller shall be entitled to determine and calculate the above amounts to the extent that Buyer or Seller, as applicable, has the right to deliver a notice to the other party demanding payment of such amount. The Calculation Agent or Buyer or Seller, as applicable, shall make such determinations and calculations based solely on the basis of the Servicer Reports, to the extent such Servicer Reports are reasonably available to the Calculation Agent or such party. The Calculation Agent or Buyer or Seller, as applicable, shall, as soon as practicable after making any of the determinations or calculations specified in (i) and (ii) above, notify the parties or the other

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party, as applicable, of such determinations and calculations. For the avoidance of doubt, if an Interest Shortfall Amount is not explicitly set out in the Servicer Report but the Calculation Agent determines that an Interest Shortfall has occurred on the basis of information in such Servicer Report, then the relevant Interest Shortfall Amount shall be calculated by the Calculation Agent on the basis of such information.14 (c) Adjustment of Calculation Agent Determinations To the extent that a Servicer furnishes any Servicer Reports correcting information contained in previously issued Servicer Reports, and such corrections impact calculations pursuant to this Transaction, the calculations relevant to the Transaction shall be adjusted retroactively by the Calculation Agent to reflect the corrected information (provided that, for the avoidance of doubt, no amounts in respect of interest shall be payable by either party and provided that the Calculation Agent in performing the calculations pursuant to this paragraph will assume that no interest has accrued on any adjusted amount), and the Calculation Agent shall promptly notify both parties of any corrected payments required by either party. Any required corrected payments shall be made within five Business Days of the day on which such notification by the Calculation Agent is effective. 8. Offices: The Office of Seller for this Transaction is [ ]. The Office of Buyer for this Transaction is [ ]. 9. Notice and Account Details: Telephone, Telex and/or Facsimile Numbers and Contact Details for Notices: Buyer: [ Seller: [ Account Details: Account Details of Buyer: Account Details of Seller: 10. [ [ ] ] ] ]

Additional Definitions and Amendments to the Credit Derivatives Definitions (a) References in Sections 4.1, 8.2, 9.1 and 9.2(a) of the Credit Derivatives Definitions as well as Section 3(a)(iv) of the form of Novation Agreement set forth in Exhibit E to the Credit Derivatives Definitions to the Reference Entity shall be deemed to be references to both the Reference Entity and the Insurer in respect of the Reference Policy, if applicable.

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This is intended to cover any situation in which the Servicer Report does not report on Interest Shortfalls.

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(b) (i) The definition of “Publicly Available Information” in Section 3.5 of the Credit Derivatives Definitions shall be amended by (i) inserting the words “the Insurer in respect of the Reference Policy, if applicable” at the end of subparagraph (a)(ii)(A) thereof, (ii) inserting the words “, servicer, sub-servicer, master servicer” before the words “or paying agent” in subparagraph (a)(ii)(B) thereof and (iii) deleting the word “or” at the end of subparagraph (a)(iii) thereof and inserting at the end of subparagraph (a)(iv) thereof the following: “or (v) is information contained in a notice or on a website published by an internationally recognized rating agency that has at any time rated the Reference Obligation”. (ii) The definition of “Physical Settlement” in Section 8.1 of the Credit Derivatives Definitions shall be amended by (i) deleting the words “Physical Settlement Amount” from the last line of the second paragraph thereof and (ii) inserting in lieu thereof the words “Exercise Amount”. (iii) The definition of “Physical Settlement Date” in Section 8.4 of the Credit Derivatives Definitions shall be amended by deleting the last sentence thereof. (c) For the purposes of this Transaction only, the following terms have the meanings given below: “Actual Principal Amount” means, with respect to the Final Amortization Date or the Legal Final Maturity Date, an amount paid on such day by or on behalf of the Issuer in respect of principal (excluding any capitalized interest) to the holder(s) of the Reference Obligation in respect of the Reference Obligation. “Aggregate Implied Writedown Amount” means the greater of (i) zero and (ii) the aggregate of all Implied Writedown Amounts minus the aggregate of all Implied Writedown Reimbursement Amounts. “Current Factor” means the factor of the Reference Obligation as specified in the most recent Servicer Report; provided that if the factor is not specified in the most recent Servicer Report, the Current Factor shall be the ratio equal to (i) the Outstanding Principal Amount as of such date, determined in accordance with the most recent Servicer Report over (ii) the Original Principal Amount. “Current Period Implied Writedown Amount” means, in respect of a Reference Obligation Calculation Period, an amount determined as of the last day of such Reference Obligation Calculation Period equal to the greater of: (i) (ii) zero; and the product of: (A) (B) the Implied Writedown Percentage; and the greater of: (1) zero; and

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(2)

the lesser of (x) the Pari Passu Amount and (y) the Pari Passu Amount plus the Senior Amount minus the aggregate outstanding asset pool balance securing the payment obligations on the Reference Obligation (all such outstanding asset pool balances as obtained by the Calculation Agent from the most recently dated Servicer Report available as of such day), calculated based on the face amount of the assets then in such pool, whether or not any such asset is performing.

“Delayed Payment” means, with respect to a Delivery Date, a Principal Payment, Principal Shortfall Reimbursement or a Writedown Reimbursement within paragraph (i) of the definition of “Writedown Reimbursement” that is described in a Servicer Report delivered to holders of the Reference Obligation or to the Calculation Agent on or after such Delivery Date. “Delayed Payment Amount” means, if persons who are holders of the Reference Obligation as of a date prior to a Delivery Date are paid a Delayed Payment on or after such Delivery Date, an amount equal to the product of (i) the sum of all such Delayed Payments, (ii) the Reference Price, (iii) the Applicable Percentage immediately prior to such Delivery Date and (iv) the Exercise Percentage. “Distressed Ratings Downgrade” means that the Reference Obligation: (i) if publicly rated by Moody’s, (A) is downgraded to “Caa2” or below by Moody’s or (B) has the rating assigned to it by Moody’s withdrawn and, in either case, not reinstated within five Business Days of such downgrade or withdrawal; provided that if such Reference Obligation was assigned a public rating of “Baa3” or higher by Moody’s immediately prior to the occurrence of such withdrawal, it shall not constitute a Distressed Ratings Downgrade if such Reference Obligation is assigned a public rating of at least “Caa1” by Moody’s within three calendar months after such withdrawal; or if publicly rated by Standard & Poor’s, (A) is downgraded to “CCC” or below by Standard & Poor’s or (B) has the rating assigned to it by Standard & Poor’s withdrawn and, in either case, not reinstated within five Business Days of such downgrade or withdrawal; provided that if such Reference Obligation was assigned a public rating of “BBB-” or higher by Standard & Poor’s immediately prior to the occurrence of such withdrawal, it shall not constitute a Distressed Ratings Downgrade if such Reference Obligation is assigned a public rating of at least “CCC+” by Standard & Poor’s within three calendar months after such withdrawal; or if publicly rated by Fitch, (A) is downgraded to “CCC” or below by Fitch or (B) has the rating assigned to it by Fitch withdrawn and, in either case, not reinstated within five Business Days of such downgrade or withdrawal; provided that if such Reference Obligation was assigned a public rating of “BBB-” or higher by Fitch immediately prior to the occurrence of such withdrawal, it shall not constitute a Distressed Ratings Downgrade if such Reference Obligation is assigned a public rating of at least “CCC+” by Fitch within three calendar months after such withdrawal.

(ii)

(iii)

“Effective Maturity Date” means the earlier of (a) the Scheduled Termination Date and (b) the Final Amortization Date. “Exercise Amount” means, for purposes of the Transaction, an amount to which a Notice of Physical Settlement relates equal to the product of (i) the original face amount of the Reference

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Obligation to be Delivered by Buyer to Seller on the applicable Physical Settlement Date; and (ii) the Current Factor as of such date. The Exercise Amount to which a Notice of Physical Settlement relates shall (A) be equal to or less than the Reference Obligation Notional Amount (determined, for this purpose, without regard to the effect of any Writedown or Writedown Reimbursement within paragraphs (i)(B) or (iii) of “Writedown” or paragraphs (ii)(B) or (iii) of “Writedown Reimbursement”, respectively) as of the date on which the relevant Notice of Physical Settlement is delivered calculated as though the Physical Settlement of all previously delivered Notices of Physical Settlement has occurred in full and (B) not be less than the lesser of (1) the Reference Obligation Notional Amount as of the date on which the relevant Notice of Physical Settlement is delivered calculated as though Physical Settlement in respect of all previously delivered Notices of Physical Settlement has occurred in full and (2) USD100,000. The cumulative original face amount of Deliverable Obligations specified in all Notices of Physical Settlement shall not at any time exceed the Initial Face Amount. “Exercise Percentage” means, with respect to a Notice of Physical Settlement, a percentage equal to the original face amount of the Deliverable Obligations specified in such Notice of Physical Settlement divided by an amount equal to (i) the Initial Face Amount minus (ii) the aggregate of the original face amount of all Deliverable Obligations specified in all previously delivered Notices of Physical Settlement. “Expected Principal Amount” means, with respect to the Final Amortization Date or the Legal Final Maturity Date, an amount equal to (i) the Outstanding Principal Amount of the Reference Obligation payable on such day (excluding capitalized interest) assuming for this purpose that sufficient funds are available for such payment, where such amount shall be determined in accordance with the Underlying Instruments, minus (ii) the sum of (A) the Aggregate Implied Writedown Amount (if any) and (B) the net aggregate principal deficiency balance or realized loss amounts (however described in the Underlying Instruments) that are attributable to the Reference Obligation. The Expected Principal Amount shall be determined without regard to the effect of any provisions (however described) of the Underlying Instruments that permit the limitation of due payments or distributions of funds in accordance with the terms of such Reference Obligation or that provide for the extinguishing or reduction of such payments or distributions. “Failure to Pay Principal” means (i) a failure by the Reference Entity (or any Insurer) to pay an Expected Principal Amount on the Final Amortization Date or the Legal Final Maturity Date, as the case may be, or (ii) payment on any such day of an Actual Principal Amount that is less than the Expected Principal Amount; provided that the failure by the Reference Entity (or any Insurer) to pay any such amount in respect of principal in accordance with the foregoing shall not constitute a Failure to Pay Principal if such failure has been remedied within any grace period applicable to such payment obligation under the Underlying Instruments or, if no such grace period is applicable, within three Business Days after the day on which the Expected Principal Amount was scheduled to be paid. “Final Amortization Date” means the first to occur of (i) the date on which the Reference Obligation Notional Amount is reduced to zero and (ii) the date on which the assets securing the Reference Obligation or designated to fund amounts due in respect of the Reference Obligation are liquidated, distributed or otherwise disposed of in full and the proceeds thereof are distributed or otherwise disposed of in full. “Fitch” means Fitch Ratings or any successor to its rating business.

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“Implied Writedown Amount” means, (i) if the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (i) of the definition of “Writedown” to occur in respect of the Reference Obligation, on any Reference Obligation Payment Date, an amount determined by the Calculation Agent equal to the excess, if any, of the Current Period Implied Writedown Amount over the Previous Period Implied Writedown Amount, in each case in respect of the Reference Obligation Calculation Period to which such Reference Obligation Payment Date relates, and (ii) in any other case, zero. “Implied Writedown Percentage” means (i) the Outstanding Principal Amount divided by (ii) the Pari Passu Amount. “Implied Writedown Reimbursement Amount” means, (i) if the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (i) of the definition of “Writedown” to occur in respect of the Reference Obligation, on any Reference Obligation Payment Date, an amount determined by the Calculation Agent equal to the excess, if any, of the Previous Period Implied Writedown Amount over the Current Period Implied Writedown Amount, in each case in respect of the Reference Obligation Calculation Period to which such Reference Obligation Payment Date relates, and (ii) in any other case, zero, provided that the aggregate of all Implied Writedown Reimbursement Amounts at any time shall not exceed the product of the Pari Passu Amount and the Implied Writedown Percentage. “Legal Final Maturity Date” means the date set out in paragraph 1 above (subject, for the avoidance of doubt, to any business day convention applicable to the legal final maturity date of the Reference Obligation), provided that if the legal final maturity date of the Reference Obligation is amended, the Legal Final Maturity Date shall be such date as amended. “Moody’s” means Moody’s Investors Service, Inc. or any successor to its rating business. “Outstanding Principal Amount” means, as of any date of determination with respect to the Reference Obligation, the outstanding principal balance of the Reference Obligation as of such date, which shall take into account: (i) all payments of principal; (ii) all writedowns or applied losses (however described in the Underlying Instruments) resulting in a reduction in the outstanding principal balance of the Reference Obligation (other than as a result of a scheduled or unscheduled payment of principal); (iii) forgiveness of any amount by the holders of the Reference Obligation pursuant to an amendment to the Underlying Instruments resulting in a reduction in the outstanding principal balance of the Reference Obligation; (iv) any payments reducing the amount of any reductions described in (ii) and (iii) of this definition; and (v) any increase in the outstanding principal balance of the Reference Obligation that reflects a reversal of any prior reductions described in (ii) and (iii) of this definition. “Pari Passu Amount” means, as of any date of determination, the aggregate of the Outstanding Principal Amount of the Reference Obligation and the aggregate outstanding principal balance of

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all obligations of the Reference Entity secured by the Underlying Assets and ranking pari passu in priority with the Reference Obligation. “Previous Period Implied Writedown Amount” means, in respect of a Reference Obligation Calculation Period, the Current Period Implied Writedown Amount as determined in relation to the last day of the immediately preceding Reference Obligation Calculation Period. “Principal Payment” means, with respect to any Reference Obligation Payment Date, the occurrence of a payment of an amount to the holders of the Reference Obligation in respect of principal (scheduled or unscheduled) in respect of the Reference Obligation other than a payment in respect of principal representing capitalized interest, excluding, for the avoidance of doubt, any Writedown Reimbursement or Interest Shortfall Reimbursement. “Principal Payment Amount” means, with respect to any Reference Obligation Payment Date, an amount equal to the product of (i) the amount of any Principal Payment on such date and (ii) the Applicable Percentage. “Principal Shortfall Amount” means, in respect of a Failure to Pay Principal, an amount equal to the greater of: (i) (ii) zero; and the amount equal to the product of: (A) (B) (C) the Expected Principal Amount minus the Actual Principal Amount; the Applicable Percentage; and the Reference Price.

If the Principal Shortfall Amount would be greater than the Reference Obligation Notional Amount immediately prior to the occurrence of such Failure to Pay Principal, then the Principal Shortfall Amount shall be deemed to be equal to the Reference Obligation Notional Amount at such time. “Principal Shortfall Reimbursement” means, with respect to any day, the payment by or on behalf of the Issuer of an amount in respect of the Reference Obligation in or toward the satisfaction of any deferral of or failure to pay principal arising from one or more prior occurrences of a Failure to Pay Principal. “Principal Shortfall Reimbursement Amount” means, with respect to any day, the product of (i) the amount of any Principal Shortfall Reimbursement on such day, (ii) the Applicable Percentage and (iii) the Reference Price. “Principal Shortfall Reimbursement Payment Amount” means, with respect to an Additional Fixed Amount Payment Date, the sum of the Principal Shortfall Reimbursement Amounts in respect of all Principal Shortfall Reimbursements (if any) made during the Reference Obligation Calculation Period relating to such Additional Fixed Amount Payment Date, provided that the aggregate of all Principal Shortfall Reimbursement Payment Amounts at any time shall not exceed the aggregate of all Floating Amounts paid by Seller in respect of occurrences of Failure to Pay Principal prior to such Additional Fixed Amount Payment Date.

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“Rating Agencies” means Fitch, Moody’s and Standard & Poor’s. “Reference Obligation Calculation Period” means, with respect to each Reference Obligation Payment Date, a period corresponding to the interest accrual period relating to such Reference Obligation Payment Date pursuant to the Underlying Instruments. “Reference Obligation Coupon” means the periodic interest rate applied in relation to each Reference Obligation Calculation Period on the related Reference Obligation Payment Date, as determined in accordance with the terms of the Underlying Instruments as at the Effective Date, without regard to any subsequent amendment. “Reference Obligation Payment Date” means (i) each scheduled distribution date for the Reference Obligation occurring on or after the Effective Date and on or prior to the Scheduled Termination Date, determined in accordance with the Underlying Instruments and (ii) any day after the Effective Maturity Date on which a payment is made in respect of the Reference Obligation. “Relevant Amount” means, if a Servicer Report that describes a Principal Payment, Writedown or Writedown Reimbursement (other than a Writedown Reimbursement within paragraph (i) of “Writedown Reimbursement”), in each case that has the effect of decreasing or increasing the interest-accruing principal balance of the Reference Obligation as of a date prior to a Delivery Date but such Servicer Report is delivered to holders of the Reference Obligation or to the Calculation Agent on or after such Delivery Date, an amount equal to the product of (i) the sum of any such Principal Payment (expressed as a positive amount), Writedown (expressed as a positive amount) or Writedown Reimbursement (expressed as a negative amount), as applicable; (ii) the Reference Price; (iii) the Applicable Percentage immediately prior to such Delivery Date; and (iv) the Exercise Percentage. “Senior Amount” means, as of any day, the aggregate outstanding principal balance of all obligations of the Reference Entity secured by the Underlying Assets and ranking senior in priority to the Reference Obligation. “Servicer” means any trustee, servicer, sub-servicer, master servicer, fiscal agent, paying agent or other similar entity responsible for calculating payment amounts or providing reports pursuant to the Underlying Instruments. “Servicer Reports” means periodic statements or reports regarding the Reference Obligation provided by the Servicer to holders of the Reference Obligation. “Standard & Poor’s” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. or any successor to its rating business. “Underlying Assets” means the assets securing the Reference Obligation for the benefit of the holders of the Reference Obligation and which are expected to generate the cashflows required for the servicing and repayment (in whole or in part) of the Reference Obligation, or the assets to which a holder of such Reference Obligation is economically exposed where such exposure is created synthetically. “Underlying Instruments” means the indenture, trust agreement, pooling and servicing agreement or other relevant agreement(s) setting forth the terms of the Reference Obligation.

23

“Writedown” means the occurrence at any time on or after the Effective Date of: (i) (A) a writedown or applied loss (however described in the Underlying Instruments) resulting in a reduction in the Outstanding Principal Amount (other than as a result of a scheduled or unscheduled payment of principal); or the attribution of a principal deficiency or realized loss (however described in the Underlying Instruments) to the Reference Obligation resulting in a reduction or subordination of the current interest payable on the Reference Obligation;

(B)

(ii)

the forgiveness of any amount of principal by the holders of the Reference Obligation pursuant to an amendment to the Underlying Instruments resulting in a reduction in the Outstanding Principal Amount; or if the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (i) above to occur in respect of the Reference Obligation, an Implied Writedown Amount being determined in respect of the Reference Obligation by the Calculation Agent.

(iii)

“Writedown Amount” means, with respect to any day, the product of (i) the amount of any Writedown on such day, (ii) the Applicable Percentage and (iii) the Reference Price. “Writedown Reimbursement” means, with respect to any day, the occurrence of: (i) (ii) a payment by or on behalf of the Issuer of an amount in respect of the Reference Obligation in reduction of any prior Writedowns; (A) (B) an increase by or on behalf of the Issuer of the Outstanding Principal Amount of the Reference Obligation to reflect the reversal of any prior Writedowns; or a decrease in the principal deficiency balance or realized loss amounts (however described in the Underlying Instruments) attributable to the Reference Obligation; or

(iii)

if the Underlying Instruments do not provide for writedowns, applied losses, principal deficiencies or realized losses as described in (ii) above to occur in respect of the Reference Obligation, an Implied Writedown Reimbursement Amount being determined in respect of the Reference Obligation by the Calculation Agent.

“Writedown Reimbursement Amount” means, with respect to any day, an amount equal to the product of: (i) (ii) (iii) the sum of all Writedown Reimbursements on that day; the Applicable Percentage; and the Reference Price.

“Writedown Reimbursement Payment Amount” means, with respect to an Additional Fixed Amount Payment Date, the sum of the Writedown Reimbursement Amounts in respect of all Writedown Reimbursements (if any) made during the Reference Obligation Calculation Period

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relating to such Additional Fixed Amount Payment Date, provided that the aggregate of all Writedown Reimbursement Payment Amounts at any time shall not exceed the aggregate of all Floating Amounts paid by Seller in respect of Writedowns occurring prior to such Additional Fixed Amount Payment Date. Please confirm your agreement to be bound by the terms of the foregoing by executing a copy of this Confirmation and returning it to us [by facsimile]. Yours sincerely, [PARTY A]

By:________________________ Name: Title:

Confirmed as of the date first above written: [PARTY B]

By:________________________ Name: Title:

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Interest Shortfall Cap Annex If Interest Shortfall Cap is applicable, then the following provisions will apply: Interest Shortfall Cap Basis: Interest Shortfall Cap Amount: [Fixed Cap][Variable Cap] If the Interest Shortfall Cap Basis is Fixed Cap, the Interest Shortfall Cap Amount in respect of an Interest Shortfall shall be the Fixed Amount calculated in respect of the Fixed Rate Payer Payment Date immediately following the Reference Obligation Payment Date on which the relevant Interest Shortfall occurred. If the Interest Shortfall Cap Basis is Variable Cap, the Interest Shortfall Cap Amount applicable in respect of a Floating Rate Payer Payment Date shall be an amount equal to the product of: (a) the sum of the Relevant Rate and the Fixed Rate applicable to the Fixed Rate Payer Calculation Period immediately preceding the Reference Obligation Payment Date on which the relevant Interest Shortfall occurs; (b) the amount determined by the Calculation Agent under sub-clause (b) of the definition of “Fixed Amount” in relation to the relevant Fixed Rate Payer Payment Date; and (c) the actual number of days in such Fixed Rate Payer Calculation Period divided by 360. Interest Shortfall Reimbursement Payment Amount: If Interest Shortfall Cap is applicable, then with respect to the first Additional Fixed Amount Payment Date, zero, and with respect to any subsequent Additional Fixed Amount Payment Date and calculated as of the Reference Obligation Payment Date immediately preceding such Additional Fixed Amount Payment Date, as specified by the Calculation Agent in its notice to the parties or by Seller in its notice to Buyer of the existence of an Interest Shortfall Reimbursement, an amount equal to the greater of: (a) (b) zero; and the amount equal to: (i) [the product of: (A)] the Cumulative Interest Shortfall Payment Amount as of the Additional Fixed Amount

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Payment Date immediately preceding such Reference Obligation Payment Date; [and (B) the relevant Cumulative Interest Shortfall Payment Compounding Factor for the Fixed Rate Payer Calculation Period immediately preceding such Additional Fixed Amount Payment Date (or 1.0 in respect of any Additional Fixed Amount Payment Date occurring after the final Fixed Rate Payer Payment Date);]15 minus (ii) the Cumulative Interest Shortfall Amount as of such Reference Obligation Payment Date; provided that if the Interest Shortfall Reimbursement Payment Amount on an Additional Fixed Amount Payment Date would exceed the Interest Shortfall Reimbursement Amount in respect of the related Reference Obligation Payment Date, then such Interest Shortfall Reimbursement Payment Amount shall be deemed to be equal to such Interest Shortfall Reimbursement Amount. Cumulative Interest Shortfall Amount: With respect to any Reference Obligation Payment Date, an amount equal to the greater of: (a) (b) zero; and an amount equal to: (i) the Cumulative Interest Shortfall Amount as of the Reference Obligation Payment Date immediately preceding such Reference Obligation Payment Date or, in the case of the first Reference Obligation Payment Date, zero; plus (ii) the Interest Shortfall Amount (if any) in respect of such Reference Obligation Payment Date; plus [(iii)
15

an amount determined by the

Parties may wish to disapply this provision where the Reference Obligation is a fixed rate security.

27

Calculation Agent as the amount of interest that would accrue on the Cumulative Interest Shortfall Amount immediately preceding such Reference Obligation Payment Date during the related Reference Obligation Calculation Period pursuant to the Underlying Instruments or, in the case of the first Reference Obligation Payment Date, zero;] 16 minus (iv) the Interest Shortfall Reimbursement Amount (if any) in respect of such Reference Obligation Payment Date. Upon the occurrence of each Delivery, the Cumulative Interest Shortfall Amount shall be multiplied by a fraction equal to (a) the Applicable Percentage immediately following such Delivery divided by (b) the Applicable Percentage immediately prior to such Delivery; provided, however, that if more than one Delivery is made during a Reference Obligation Calculation Period, the Cumulative Interest Shortfall Amount calculated as of the Reference Obligation Payment Date occurring immediately after such Reference Obligation Calculation Period shall be multiplied by a fraction equal to (a) the Applicable Percentage immediately following the final Delivery made during such Reference Obligation Calculation Period and (b) the Applicable Percentage immediately prior to the first Delivery made during such Reference Obligation Calculation Period.

16

Parties may wish to disapply this provision where the Reference Obligation is a fixed rate security.

28

Cumulative Interest Shortfall Payment Amount:

The Cumulative Interest Shortfall Payment Amount with respect to any Fixed Rate Payer Payment Date and any Additional Fixed Amount Payment Date falling on such Fixed Rate Payer Payment Date shall be an amount equal to the greater of: (a) (b) zero; and the amount equal to: (i) the sum of: (A) the Interest Shortfall Payment Amount for the Reference Obligation Payment Date corresponding to such Fixed Rate Payer Payment Date; and (B) [the product of: (1)] the Cumulative Interest Shortfall Payment Amount as of the Fixed Rate Payer Payment Date immediately preceding such Fixed Rate Payer Payment Date (or zero in the case of the first Fixed Rate Payer Payment Date); [and (2) the relevant Cumulative Interest Shortfall Payment Compounding Factor;]17 minus (ii) any Interest Shortfall Reimbursement Payment Amount paid on such Fixed Rate Payer Payment Date. With respect to any Additional Fixed Amount Payment Date falling after the final Fixed Rate Payer Payment Date, the Cumulative Interest Shortfall Payment Amount shall be equal to: (x) the Cumulative Interest Shortfall Payment Amount as of the Additional Fixed Amount Payment Date immediately preceding such Additional Fixed Amount Payment Date (or as of

17

Parties may wish to disapply this provision where the Reference Obligation is a fixed rate security.

29

the final Fixed Rate Payer Payment Date in the case of the first Additional Fixed Amount Payment Date occurring after the final Fixed Rate Payer Payment Date); minus (y) any Interest Shortfall Reimbursement Payment Amount paid on such Additional Fixed Amount Payment Date. Upon the occurrence of each Delivery, the Cumulative Interest Shortfall Payment Amount shall be multiplied by a fraction equal to (a) the Applicable Percentage immediately following such Delivery divided by (b) the Applicable Percentage immediately prior to such Delivery; provided, however, that if more than one Delivery is made during a Reference Obligation Calculation Period, the Cumulative Interest Shortfall Payment Amount calculated as of the Reference Obligation Payment Date occurring immediately after such Reference Obligation Calculation Period shall be multiplied by a fraction equal to (a) the Applicable Percentage immediately following the final Delivery made during such Reference Obligation Calculation Period and (b) the Applicable Percentage immediately prior to the first Delivery made during such Reference Obligation Calculation Period. Cumulative Interest Shortfall Payment Compounding Factor: With respect to any Fixed Rate Payer Calculation Period, an amount equal to the sum of: (a) 1.0; plus (b) the product of: (i) the sum of (A) the Relevant Rate plus (B) the Fixed Rate; and (ii) the actual number of days in such Fixed Rate Payer Calculation Period divided by 360; provided, however, that the Cumulative Interest Shortfall Payment Compounding Factor shall be deemed to be 1.0 during the period from but excluding the Effective Maturity Date to and including the Termination Date. Relevant Rate: With respect to a Fixed Rate Payer Calculation Period, the Floating Rate, expressed as a decimal number with seven decimal places, that would be determined if:

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(a) the 2000 ISDA Definitions (and not the 2003 ISDA Credit Derivatives Definitions) applied to this paragraph; (b) the Fixed Rate Payer Calculation Period were a “Calculation Period” for purposes of such determination; and (c) the following terms applied: (i) the Floating Rate Option were the Rate Source; (ii) the Designated Maturity were the period that corresponds to the usual length of a Fixed Rate Payer Calculation Period; and (iii) the Reset Date were the first day of the Calculation Period; provided, however, that the Relevant Rate shall be deemed to be zero during the period from but excluding the Effective Maturity Date to and including the Termination Date. Rate Source: [USD-LIBOR-BBA] 18

18

Specify an appropriate Floating Rate Option from the 2000 ISDA Definitions for the currency in which the Reference Obligation is denominated.

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